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July 27, 2011

Fiduciary Rule Proposal Prompts Senator to Call Meeting With DOL

EBSA chief said during Tuesday hearing that she's 'not quite there yet' on agreeing to repropose the rule

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A day after lawmakers told Phyllis Borzi, head of the Department of Labor’s Employee Benefits Security Administration (EBSA) to repropose the agency’s controversial rule amending the definition of fiduciary, Sen. Kay Hagan, D-N.C., said Wednesday that her office plans to meet with both Borzi and Secretary of Labor Hilda Solis to discuss the fiduciary proposal.

“You can’t have two [different fiduciary] definitions from the SEC and DOL and still provide people with the financial education they need,” Hagan, a member of the Senate Health Education Labor and Pensions Committee, said during remarks at an event sponsored by the Financial Services Roundtable in Washington. Fiduciary rulemaking, she said, “is an issue that’s at the top of the chart.”

The roundtable, “Protect 2011: Workplace Benefits and Financial Security,” included comments about EBSA's proposal to redefine fiduciary under the Employee Retirement Income Security Act (ERISA).

Rep. Phil Roe, R-Tenn., chairman of the House Subcommittee on Health, Employment, Labor and Pensions, told Borzi during a hearing on Tuesday to assess the impact of EBSA’s fiduciary proposal, that the current proposal “is an ill-conceived expansion of the fiduciary standard.”

He said that the proposal would “undermine efforts by employers and service providers to educate workers on the importance of responsible retirement planning,” and “may deny investment opportunities and drive up costs for the individuals it is intended to protect.”

Furthermore, Roe argued, the EBSA “failed to examine all of the costs of its proposal,” including how those costs affect the IRA market.

But Borzi stated during her comments at the Tuesday hearing that EBSA was not likely to repropose its fiduciary rule.

“We had lots of public comments” on the fiduciary proposal, she said, which included “many of the issues we flagged for ourselves.” However, “nobody has suggested to us an alternative structure from the structure we’ve proposed” in EBSA’s fiduciary rule, she said.

She added: “They’ve had criticisms and comments and they’ve said, quite accurately--and because we knew we had to do it--to focus more on the cost” of the rule, “but I’m not quite there yet that the kinds of public comments that we’ve gotten have suggested such a fundamental alternative that we need to repropose it.”